The National Bureau of Statistics (NBS) has released the Gross Domestic Product (GDP) by Income and Expenditure Approach for 2017. The report combines the data for all the four quarters in 2017.
In 2017, real GDP turned positive in the second quarter and sustained its acceleration on a year-on-year basis. Annual real GDP growth rate in 2017 was recorded at 0.82%, signifying economic recovery when compared to –1.58% in 2016.
According to the report, Real Household Consumption and Government Consumption Expenditures generally declined in 2017 at –0.99%, but still improved compared to -5.71 that was recorded in 2016. It also shows that aggregate domestic demand in the economy was still weak in 2017.
However, Net Exports grew significantly in real terms in the year under review, which was mainly driven by the strong performance in the third quarter of the year. The annual growth rate of real exports was 8.74%, slightly less than 11.53% recorded last year. However, this was still slower than 2016 by 22%.
Also, National Disposable Income declined by 1.52% in 2017, majorly due to the continuous decline in the largest component — Operating Surplus which recorded a negative annual growth rate of –2.11%. Compensation of Employees performed strongly in 2017, with an annual growth rate of 11.14% compared to -9.68% recorded in 2016. Nevertheless, the expansion could not prevent this category from recording negative values.
The NBS report went on to highlight that the Nigerian economy exited recession in the second quarter of 2017 (when it returned to positive growth) and slowly began its recovery. However, to stimulate the recorded growth, improvements in domestic consumption and business environment are very crucial, so that the growth will not be eroded.
What led to the recovery?
According to the report, the economic recovery was mainly driven by improved net exports (trade balance), with all other components of real GDP by expenditure remaining negative (except Not-for-Profit-Institutions-Serving-Households (NPISH) consumption). However, they were better than those recorded in 2016.
NPISH consumption also recorded expansion in 2017, but it contributes less than 0.5% of real GDP. Other expenditure components also contracted during 2017, compared with the increased proportion of Net Exports. This implies that the recovery from recession was largely driven by recovery in Nigeria’s main exports which is oil, combined with control in imports, which improved net exports (the only component that grew positively) significantly.
GDP By Expenditure
The Gross Domestic Product (GDP) can be derived as the value of all goods and services available for final uses and export. GDP at market prices includes net taxes on products; taxes are subtracted to obtain basic price GDP.
Also, the expenditure approach measures the final uses of the produced output as the sum of Final consumption, Gross Capital Formation and Exports less Imports, which are considered in turn in this report. Consumption of fixed capital—a measure of depreciation of assets—comprises the difference between Gross Domestic Product (GDP) and Net Domestic Product (NDP) and is also considered in this report.
Basic price GDP grew in real terms by 0.82% year on year in 2017 showing a significant improvement compared to a decline of -1.58% decline recorded as real GDP growth rate in 2016.
Household Final Consumption
In 2017, household final consumption reduced by -0.99% from 2016 in real terms, although it increased nominally by 9.77%. The decline in real household consumption was an improvement on the -5.71% recorded in 2016. Weak household consumption growth indicates weak recovery of the domestic economy, while the nominal growth reflects the increase in prices over the year of 2017.
However, this component accounted for 58.93% of real GDP in 2017. In the first two quarters of 2017 (Q1 and Q2), real household final consumption recorded both year on year and quarter on quarter growth. Nevertheless, consumption declined sharply in Q3 2017 (-11.88%) in real terms on year on year basis. The positive growth in consumption in Q4 2017 was not enough to offset the decline in Q3 2017.
Balance of Trade in Goods and Services
The value of exports is greatly affected by the price of oil, given that a large percentage of the total value of exports consists of crude oil. 2017 had sizable growths in both exports and imports of goods and services in nominal terms. However, real exports and imports growth still fluctuated through the year.